EXHIBIT 10.1

                              AMENDED AND RESTATED
                                WARRANT AGREEMENT

                                     BETWEEN

                            CHAPARRAL RESOURCES, INC.

                                       AND

                              SHELL CAPITAL LIMITED

                           DATED AS OF APRIL 18, 2001
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                               TABLE OF CONTENTS

                                                                            Page

1.    DEFINITIONS............................................................. 1

2.    GRANT................................................................... 3

3.    WARRANT CERTIFICATES.................................................... 3

4.    REGISTRATION OF WARRANT................................................. 3

5.    EXERCISE OF WARRANT..................................................... 4

6.    ISSUANCE OF CERTIFICATES................................................ 4

7.    TRANSFER OF WARRANT..................................................... 4

8.    NOTICE OF EXPIRATION.................................................... 5

9.    REGISTRATION RIGHTS..................................................... 5

      9.1      RESTRICTIVE LEGENDS............................................ 5
      9.2      PIGGYBACK REGISTRATION......................................... 5
      9.3      DEMAND REGISTRATION............................................ 6
      9.4      COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION.......... 7
      9.5      INDEMNIFICATION WITH RESPECT TO REGISTRATION................... 9

10.   OBLIGATIONS OF HOLDERS.................................................. 9

11.   ADJUSTMENTS TO COMMON STOCK EXERCISE PRICE AND NUMBER OF SECURITIES..... 9

      11.1     ADJUSTMENT FOR CHANGES IN COMMON STOCK.........................10
      11.2     ADJUSTMENT FOR CASH DIVIDENDS AND OTHER DISTRIBUTIONS..........11
      11.3     ADJUSTMENT FOR RIGHTS ISSUED TO ALL HOLDERS OF COMMON STOCK....12
      11.4     ADJUSTMENT FOR OTHER ISSUANCES OF COMMON STOCK OR RIGHTS.......14
      11.5     NO ADJUSTMENT..................................................15
      11.6     NOTICE OF ADJUSTMENT...........................................16
      11.7     MERGER OR CONSOLIDATION........................................16
      11.8     OTHER DILUTIVE EVENTS..........................................16

12.   EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES........................17

13.   LIMITATION OF FRACTIONAL INTERESTS......................................17

14.   RESERVATION AND LISTING OF SECURITIES...................................17

15.   NOTICES TO WARRANT HOLDERS..............................................18

16.   NOTICES.................................................................18

17.   SUPPLEMENTS; AMENDMENTS; ENTIRE AGREEMENT...............................18

18.   SUCCESSORS..............................................................19

19.   GOVERNING LAW...........................................................19

20.   SEVERABILITY............................................................19

21.   CAPTIONS................................................................19

22.   BENEFITS OF THIS AGREEMENT..............................................19

23.   COUNTERPARTS............................................................19
<PAGE>

     AMENDED AND RESTATED  WARRANT  AGREEMENT  (this  "Agreement"),  dated as of
April 18, 2001, between CHAPARRAL  RESOURCES,  INC., a Delaware corporation (the
"Company"), and SHELL CAPITAL LIMITED a company organised and existing under the
laws of England (the "Purchaser") and its assignees or designees (the "Holder").

                              W I T N E S S E T H:

     WHEREAS,  the Company has entered into a Loan Agreement,  dated November 1,
1999 (the "Loan  Agreement"),  between  the  Company,  Central  Asian  Petroleum
(Guernsey)  Limited,   Central  Asian  Petroleum,   Inc.  and  Closed  Type  JSC
Karakudukmunay, as the Co-Obligors, Shell Capital Limited as the Facility Agent,
Shell Capital  Services  Limited as the Arranger,  Shell as the Modeller and the
Lenders (each such term as defined in the Loan Agreement);

     WHEREAS,  in order to induce  Shell to enter into the Loan  Agreement,  the
Company,  on February 8, 2000,  issued  warrants  (the  "Warrants")  to purchase
shares of common stock, par value $.0001 per share, of the Company;

     WHEREAS, in connection with a financial  restructuring of the Company,  the
Company  and the  Purchaser  deemed  it  prudent  and in their  respective  best
interests to clarify certain terms and conditions of the Warrants ; and

     WHEREAS,  this Agreement hereby amends and restates the Warrants to reflect
the  clarifications  deemed  necessary  and  appropriate  by the Company and the
Purchaser.

     NOW, THEREFORE,  In consideration of the premises and the mutual agreements
set forth in this Agreement, the parties hereto agree as follows:

1.   DEFINITIONS

"Commencement Date" means the earlier of

     (a) the Project Completion Date; and

     (b) September 30, 2001.

"Commission" means the Securities and Exchange Commission.

"Common Stock" means

     (a) the class of stock  designated  as common stock in the  certificate  of
incorporation of the Company as amended as of the date of this Agreement; or

     (b)  any  other  class  of  stock  resulting  from  successive  changes  or
reclassifications  of such  Common  Stock  consisting  solely of  changes in par
value, or from par value to no par value or from no par value to par value.

"Common Stock Exercise Price" has the meaning provided in Section 2.

"Common Stock  Exercise  Price Premium" means the amount equal to 110% times the
then current  Common Stock  Exercise Price per share of Common Stock on the date
of determination.

"Employee  Stock Options" means up to fifteen  percent (15%) of the Common Stock
of the Company  issuable or issued in connection with incentive or non-qualified
stock options or grants to directors, officers and consultants of the Company or
the Co-Obligors (as defined in the Loan Agreement).

"Event of Default" has the meaning provided in the Loan Agreement.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Excluded  Warrants" means the Warrants to acquire shares of the Company held by
each of Allen & Company Incorporated and Whittier Ventures, L.L.C.

"Expiration Date" means the fifth anniversary of the Commencement Date.

"Holder(s)"  means the  Purchaser  (so long as it holds any  Warrants or Warrant
Shares) and any other  registered  holder(s)  of any of the  Warrants or Warrant
Shares.

"Independent  Financial  Expert"  means a  nationally  recognized  appraiser  or
investment  banking  firm that  does not (and  whose  affiliates  do not) have a
direct or indirect financial interest in the Company,  the Holder (other than in
its  trading  accounts  or as a  participating  underwriter  in an  offering  of
securities) or any of the shareholders of the Company, that has not been, and at
the time it is  called  upon to  determine  Market  Price  (or any of the  other
valuations  referred to in Section 11), is not (and none of whose affiliates is)
a promoter,  director or officer of the Company or any of its  affiliates or the
Holder or an  underwriter  with respect to any of the securities of the Company,
and that has not provided  any advice or opinions to the Company  during the two
years  prior to the date it is  called  upon to serve as  Independent  Financial
Expert, except as an Independent Financial Expert pursuant to this Agreement.

"Loan Agreement" has the meaning provided in the first Whereas clause.

"Majority"  means in  excess  of  fifty  percent  (50%) of the then  outstanding
Warrants  or Warrant  Shares  that (i) are not held by the Company or any of its
affiliates, officers, creditors, employees, or agents or any of their respective
affiliates,   members  of  their  family,  persons  acting  as  nominees  or  in
conjunction with any of them or (ii) have not been resold to the public pursuant
to a registration statement filed with the Commission under the Securities Act.

"Market Price" means at any date,  the last reported sale price,  or, in case no
such  reported  sale takes place on such day,  the average of the last  reported
sale prices for the last three (3) trading  days,  in either case as  officially
reported  by the  principal  securities  exchange  on which the Common  Stock is
listed or admitted to trading, or, if the Common Stock is not listed or admitted
to trading on any national securities  exchange,  the average closing sale price
as furnished by the NASD through NASDAQ or similar  organization if NASDAQ is no
longer  reporting  such  information,  or if the  Common  Stock is not quoted on
NASDAQ,  the OTC Electronic  Bulletin  Board, or as determined by an Independent
Financial  Expert  selected by the Holders holding a Majority of the Warrants or
Warrant Shares, and reasonably acceptable to the Company.

"NASDAQ" means The NASDAQ Stock Market Inc.

"Person" means an individual,  a corporation,  a limited  liability  company,  a
company, a voluntary association,  a general partnership, a limited partnership,
a  trust,  an  unincorporated  organization  or  a  government  or  any  agency,
instrumentality or political subdivision of a government.

"Project Completion Date" has the meaning provided in the Loan Agreement.

"Requesting Holders" has the meaning provided in Section 9.3.

"Securities Act" means the Securities Act of 1933, as amended.

"Surrender" has the meaning provided in Section 5.

"Transfer Agent" has the meaning provided in Section 14.

"United  States  Dollars"  means the national  currency of the United  States of
America.

"Warrant Certificates" means the certificates evidencing the Warrants.

"Warrant  Shares"  means all the shares of Common Stock  issuable or issued upon
the exercise of the Warrants.

"Warrants" has the meaning provided in the second Whereas clause.

2.   GRANT.

     Subject to the terms of this  Agreement,  the  Holder  will have the right,
which  may be  exercised  at any  time  between  the  Commencement  Date and the
Expiration Date, to purchase up to 1,785,455 shares of Common Stock representing
twelve and one-half percent (12.5%) of the issued Common Stock of the Company at
the time of such  purchase.  The price at which  the  Warrants  are  exercisable
(subject  to  adjustment  as  provided  in  Section  11) is $9.79 per share (the
"Common Stock Exercise Price"). Each Warrant not exercised by 5:00 p.m., Houston
time,  on the  Expiration  Date will  become  void and all  rights  under and in
respect  of such  Warrants  under  this  Agreement  will  cease as of such time;
provided that the occurrence of the Expiration Date will not relieve the Company
of any  obligation  to the  Holder  which  arose  pursuant  to the terms of this
Agreement prior to such date.

3.   WARRANT CERTIFICATES.

     The Warrant  Certificates  delivered  and to be delivered  pursuant to this
Agreement  are in the form  set  forth  in  Exhibit  A,  with  such  appropriate
insertions,  omissions,  substitutions,  and other  variations  as  required  or
permitted by this Agreement.

4.   REGISTRATION OF WARRANT.

     The Warrants  will be numbered and will be  registered  on the books of the
Company when issued.

5.   EXERCISE OF WARRANT.

     A Warrant may be  exercised,  upon  surrender to the Company at its address
set forth on the signature pages of this Agreement,  of the Warrant  Certificate
or Warrant  Certificates  to be exercised  with the annexed  Purchase  Form duly
executed,  together  with  payment to the Company of the Common  Stock  Exercise
Price for the  number of shares of Common  Stock  purchased  (collectively,  the
"Surrender").  The Holder will pay the aggregate  Common Stock Exercise Price by
wire transfer to an account designated by the Company.  Upon the Surrender,  the
Holder will be entitled to receive a certificate or certificates  for the shares
of Common Stock so purchased. The rights represented by each Warrant Certificate
are  exercisable at the option of the Holder in whole or in part,  provided that
such exercise is in respect of at least five percent (5%) of the Warrant Shares.
In the case of the purchase of less than all of the shares purchasable under any
Warrant  Certificate,  the Company will cancel that Warrant Certificate upon its
surrender and will execute and deliver a new Warrant  Certificate  of like tenor
for the balance of the shares of Common Stock which may be purchased pursuant to
that Warrant Certificate.

6.   ISSUANCE OF CERTIFICATES.

     The issuance of certificates  for Common Stock underlying each Warrant will
be made (and in any event within ten (10)  business  days) after the exercise of
the Warrant without charge to the Holder including,  without limitation, any tax
or other  governmental  charges  (including  all  documentary  stamp taxes,  but
excluding  income taxes  payable by a Holder) which may be payable in respect of
the issuance of such  certificates,  and such  certificates will (subject to the
provisions  of  Sections  7 and 9) be issued in the name of, or in such names as
may be directed by, the Holder;  provided  that the Company will not be required
to pay any tax which may be payable in respect of any  transfer  involved in the
issuance and delivery of any such  certificates in a name other than that of the
Holder  and  the  Company  will  not  be  required  to  issue  or  deliver  such
certificates  unless or until the person or persons  requesting  the issuance of
such  certificates  has  paid to the  Company  the  amount  of  such  tax or has
established to the satisfaction of the Company that such tax has been paid.

     The Warrant Certificates and the certificates representing the Common Stock
issued upon  exercise of the Warrants  must be executed on behalf of the Company
by the  manual  or  facsimile  signature  of a duly  authorized  officer  of the
Company. Warrant Certificates will be dated the date of execution by the Company
upon initial issuance, division, exchange, substitution or transfer. The Company
and the  Purchaser  hereby  acknowledge  and agree that upon delivery of Warrant
Certificate No. 2, Warrant Certificate No. 1 shall become null and void.

7.   TRANSFER OF WARRANT.

     The Warrants are transferable  only on the books of the Company  maintained
at its principal  office,  where its principal office may then be located,  upon
delivery of the Warrant  Certificate  duly endorsed by the Holder or by its duly
authorized  attorney-in-fact or representative accompanied by proper evidence of
succession,  assignment or authority to transfer;  provided,  however,  that the
Purchaser  may only transfer  Warrants to  affiliates  of such  Purchaser or any
successor thereof.  Upon any registration of transfer,  the Company will execute
and deliver the new Warrant Certificate to the person entitled to it.

8.   NOTICE OF EXPIRATION.

     The Company will,  upon request of any Holder as reflected in the books and
records of the Company,  give written notice of the Expiration Date. Such notice
must be delivered not less than ten (10) days after such request is made.

9.   REGISTRATION RIGHTS.

     Nothing  contained in this  Agreement  shall be construed as requiring  the
Holder(s)  to  exercise  their  Warrants  prior  to the  initial  filing  of any
registration statement or its effectiveness.

9.1  RESTRICTIVE LEGENDS.

     Each Warrant  Certificate  and each  certificate  representing  the Warrant
Shares will bear the following  legend unless (a) such Warrant or Warrant Shares
are  distributed to the public or sold to underwriters  for  distribution to the
public  pursuant  to this  Section 9 or  otherwise  pursuant  to a  registration
statement  filed under the  Securities  Act, or (b) the Company has  received an
opinion of counsel, in form and substance reasonably satisfactory to counsel for
the Company, that such legend is unnecessary for any such certificate:

     THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE  AND THE OTHER  SECURITIES
ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE OFFERED OR SOLD, EXCEPT PURSUANT TO (I) AN EFFECTIVE  REGISTRATION  STATEMENT
UNDER THE  SECURITIES  ACT OF 1933 (THE "ACT"),  (II) TO THE EXTENT  APPLICABLE,
RULE 144 UNDER THE ACT (OR ANY SIMILAR OR SUCCESSOR  RULE UNDER THE ACT RELATING
TO THE  DISPOSITION  OF  SECURITIES),  OR (III) AN OPINION OF  COUNSEL,  IF SUCH
OPINION  SHALL BE  REASONABLY  SATISFACTORY  TO COUNSEL FOR THE ISSUER,  THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.

     THE TRANSFER OR EXCHANGE OF THE SECURITIES  REPRESENTED BY THIS CERTIFICATE
IS  RESTRICTED  IN ACCORDANCE  WITH THE AMENDED AND RESTATED  WARRANT  AGREEMENT
BETWEEN  CHAPARRAL  RESOURCES,  INC. AND SHELL CAPITAL LIMITED DATED AS OF APRIL
18,  2001,  AS THE SAME MAY BE AMENDED,  MODIFIED OR  SUPPLEMENTED  FROM TIME TO
TIME.

9.2  PIGGYBACK REGISTRATION.

     If the  Company  proposes  to  register  any of its  securities  under  the
Securities Act, it will give written notice,  at least thirty (30) days prior to
the filing of a registration  statement  pursuant to the Securities  Act, to the
Holders of its intention to do so. If the Holders  notify the Company within ten
(10)  business days of receipt of any such notice of their desire to include any
of their  Warrants and Warrant Shares in such proposed  registration  statement,
the Company  shall  afford the  opportunity  to have any of their  Warrants  and
Warrant Shares registered under such registration  statement.  In the event that
the managing  underwriter  for the said offering  advises the Company in writing
that in its opinion the number of  securities  requested  to be included in such
registration  exceeds  the  number  which can be sold in such  offering  without
causing a diminution in the offering price or otherwise  adversely affecting the
offering, the Company will include in such registration

          (a) FIRST, the securities the Company proposes to sell; and

          (b) SECOND,  the Warrants,  Warrant Shares and other securities of the
     Company requested to be included in such registration  which in the opinion
     of such underwriter can be sold, pro rata among the holders on the basis of
     the number of Warrants,  Warrant Shares or other securities requested to be
     registered by such holders.

     Notwithstanding  the provisions of this Section 9.2, the Company shall have
the right at any time after it has given written notice pursuant to this Section
9.2  (irrespective  of  whether  a written  request  for  inclusion  of any such
securities  has been made) to elect not to file any such  proposed  registration
statement  or to withdraw  the same after the filing but prior to the  effective
date thereof.

9.3  DEMAND REGISTRATION.

     (a) The Holders  representing a Majority of the Warrants and Warrant Shares
shall have the right  (which  right is in  addition to the  registration  rights
under Section 9.2),  exercisable by written  notice to the Company,  to have the
Company  prepare and file with the Commission,  on one occasion,  a registration
statement and such other documents,  including a prospectus, as may be necessary
in the opinion of both counsel for the Company and counsel for the  Holders,  in
order to comply with the  provisions  of the  Securities  Act, so as to permit a
public  offering and sale by such  Holders and any other  Holders who notify the
Company  within fifteen (15) days after the Company mails notice of such request
pursuant to Section 9.3(b)  (collectively,  the  "Requesting  Holders") of their
Warrants and Warrant Shares for the earlier of (i) six (6) consecutive months or
(ii) until the sale of all of the  Warrants and Warrant  Shares  requested to be
registered by the Requesting  Holders.  Registration and all costs incidental to
such registration shall be at the expense of the Company.

     (b) The Company shall give written notice of any registration request under
this  Section  9.3 by any  Holder or  Holders  representing  a  Majority  of the
Warrants and Warrant Shares to all other Holders of the Warrants and the Warrant
Shares  within  ten  (10)  days  from  the  date  of the  receipt  of  any  such
registration request.

     (c) In addition to the registration rights under Section 9.2 and subsection
(a) of this  Section  9.3, the Holders of a Majority of the Warrants and Warrant
Shares shall have the right on one occasion,  exercisable by written  request to
the  Company,  to have the  Company  prepare  and file  with  the  Commission  a
registration  statement  so as to  permit  a  public  offering  and sale by such
Holders of their  Warrants  and  Warrant  Shares for the  earlier of (i) six (6)
consecutive months or (ii) until the sale of all of the Warrant Shares requested
to be registered by such Holders; provided, however,  registration and all costs
incidental to such  registration  shall be shared equally  between the Holder or
Holders making such request and the Company. If the Holders have exercised their
rights under Section 9.3(a) then the Holders may not exercise their rights under
this Section 9.3(c) for a period of six (6) months  following the effective date
of any registration statement filed pursuant to Section 9.3(a).

     (d)  In  addition  to  the  registration   rights  under  Section  9.2  and
subsections  (a) and of this  Section  9.3,  the  Holders of a  Majority  of the
Warrants and Warrant Shares shall have the right on one occasion, exercisable by
written  request to the Company,  to have the Company  prepare and file with the
Commission a registration  statement so as to permit a public  offering and sale
by such Holders of their  Warrants and Warrant Shares for the earlier of (i) six
(6)  consecutive  months  or (ii)  until the sale of all of the  Warrant  Shares
requested to be registered by such Holders; provided, however,  registration and
all costs incidental to such registration  shall be at the expense of the Holder
or Holders making such request. If the Holders have exercised their rights under
Section  9.3(a) or Section 9.3(c) then the Holders may not exercise their rights
under this Section 9.3(d) for a period of six (6) months following the effective
date of any registration statement filed pursuant to Section 9.3(a) or 9.3(c).

     (e)  Notwithstanding  anything to the contrary contained in this Agreement,
if the Company  has not filed a  registration  statement  for the  Warrants  and
Warrant Shares within the time period  specified in Section  9.4(a)  pursuant to
the written notice specified in Section 9.3(a),  9.3(c) or 9.3(d) of the Holders
of a Majority of the Warrants and Warrant Shares,  the Company shall  repurchase
(i) any and all  Warrant  Shares at the higher of the Market  Price per share of
Common  Stock on (A) the date of the notice  sent  pursuant  to Section  9.3(a),
9.3(c)  or  9.3(d),  as the case may be,  or (B) the  expiration  of the  period
specified  in Section  9.4(a) and (ii) any and all Warrants at such Market Price
less the Common Stock Exercise Price of such Warrant.  Such repurchase  shall be
in  immediately  available  funds and shall close  within two (2) days after the
later of (i) the  expiration of the period  specified in Section  9.4(a) or (ii)
the delivery of the written notice of election specified in this Section 9.3(e).

9.4  COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION.

     In connection with any registration  under Sections 9.2 or 9.3, the Company
will:

          (a) use its best efforts to file a registration statement within sixty
     (60) days of receipt of any demand pursuant to Section 9.3, and to have any
     registration  statements  declared effective at the earliest possible time,
     and will furnish each Holder desiring to sell Warrant Shares such number of
     prospectuses as shall reasonably be requested;

          (b) pay all reasonable costs, fees and expenses  (excluding:  (i) fees
     and  expenses  of  Holder(s);   and  (ii)  any   underwriting   or  selling
     commissions) in connection with all registration  statements filed pursuant
     to Sections 9.2,  9.3(a) and to the extent  provided in 9.3(c),  including,
     without  limitation,  the Company's  legal and  accounting  fees,  printing
     expenses, blue sky fees and expenses;

          (c) take all action which may be required in qualifying or registering
     the Warrant Shares  included in a  registration  statement for offering and
     sale under the securities or blue sky laws of such states as reasonably are
     requested  by  the  Holder(s),  provided  that  the  Company  shall  not be
     obligated  to execute or file any general  consent to service of process or
     to qualify as a foreign  corporation  to do business  under the laws of any
     such jurisdiction;

          (d) indemnify the Holder(s) of the Warrant  Shares to be sold pursuant
     to any  registration  statement and each person,  if any, who controls such
     Holders  within the meaning of Section 15 of the  Securities Act or Section
     20(a) of the Exchange  Act,  against all loss,  claim,  damage,  expense or
     liability  (including all expenses  reasonably  incurred in  investigating,
     preparing or defending  against any claim  whatsoever) to which any of them
     may become subject under the Securities Act, the Exchange Act or otherwise,
     arising from such registration statement;

          (e) not permit the inclusion of any securities other than the Warrants
     and  Warrant  Shares to be  included in any  registration  statement  filed
     pursuant to Section 9.3, or permit any other  registration  statement to be
     or remain  effective during the  effectiveness of a registration  statement
     filed  pursuant to Section 9.3,  without the prior  written  consent of the
     Holders  of a Majority  of  Warrants  and  Warrant  Shares or as  otherwise
     required by the terms of any existing  registration rights granted prior to
     the date of this  Agreement  by the  Company  to the  holders of any of the
     Company's securities;

          (f) furnish to each Holder  participating  in the offering and to each
     underwriter,  if any, a signed  counterpart,  addressed  to such  Holder or
     underwriter,  of (i) an  opinion  of  counsel  to the  Company,  dated  the
     effective date of such  registration  statement (and, if such  registration
     includes an underwritten public offering,  an opinion dated the date of the
     closing under the underwriting agreement), and (ii) a "cold comfort" letter
     dated the  effective  date of such  registration  statement  (and,  if such
     registration  includes an under-written public offering, a letter dated the
     date  of the  closing  under  the  underwriting  agreement)  signed  by the
     independent  public  accountants  who have issued a report on the Company's
     financial statements included in such registration statement, in which case
     covering  substantially  the same matters with respect to such registration
     statement (and the prospectus included in the registration  statement) and,
     in the case of such accountants'  letter, with respect to events subsequent
     to the date of such financial  statements,  as are  customarily  covered in
     opinions  of issuer's  counsel and in  accountants'  letters  delivered  to
     underwriters in underwritten public offerings of securities;

          (g)  as  soon  as   practicable   after  the  effective  date  of  the
     registration  statement,  and in  any  event  within  fifteen  (15)  months
     thereafter,  make generally  available to its security  holders an earnings
     statement  (within the meaning of Rule 158 under the Securities  Act)(which
     need not be audited) complying with Section 11(a) of the Securities Act and
     covering a period of at least  twelve  (12)  consecutive  months  beginning
     after the effective date of the registration statement, and

          (h) shall  enter  into an  underwriting  agreement  with the  managing
     underwriters  selected for such  underwriting by Holders holding a Majority
     of the Warrant Shares requested to be included in such  underwriting.  Such
     agreement shall be satisfactory in form and substance to the Company,  each
     Holder   and  such   managing   underwriters,   and  shall   contain   such
     representations,  warranties  and  covenants  by the Company and such other
     terms as are  customarily  contained in agreements of that type used by the
     managing  underwriter.  The  Holders  shall be parties to any  underwriting
     agreement relating to an underwritten sale of their Warrant Shares and may,
     at their option,  require that any or all the  representations,  warranties
     and  covenants  of the Company to or for the  benefit of such  underwriters
     shall also be made to and for the  benefit of such  Holders.  Such  Holders
     shall not be  required  to make any  representations  or  warranties  to or
     agreements with the Company or the  underwriters  except as they may relate
     to such Holders and their intended methods of distribution.

9.5  INDEMNIFICATION WITH RESPECT TO REGISTRATION.

     The Holder(s) of the Warrant  Shares to be sold pursuant to a  registration
statement,  and their successors and assigns,  will severally,  and not jointly,
indemnify the Company,  its officers and directors and each person,  if any, who
controls the Company  within the meaning of Section 15 of the  Securities Act or
Section 20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability   (including  all  expenses   reasonably  incurred  in  investigating,
preparing or defending  against any claim  whatsoever)  to which they may become
subject under the  Securities  Act, the Exchange Act or otherwise,  arising from
information  furnished by or on behalf of such Holders,  or their  successors or
assigns, for specific inclusion in such registration statement.

10.  OBLIGATIONS OF HOLDERS.

     It shall be a condition precedent to the obligations of the Company to take
any action  pursuant to Section 9 that the  Holders of the Warrant  Shares to be
sold pursuant to a registration statement will:

          (a) furnish to the Company such information regarding themselves,  the
     Warrant  Shares  held by  them,  the  intended  method  of  sale  or  other
     disposition of such securities, the identity of and compensation to be paid
     to any underwriters proposed to be employed in connection with such sale or
     other disposition, and such other information as may be necessary to effect
     the registration of their Warrant Shares, and

          (b) notify the Company,  at any time when a prospectus relating to the
     Warrant  Shares  covered by a  registration  statement  is  required  to be
     delivered  under the  Securities  Act, of the  happening  of any event with
     respect to such selling Holder as a result of which the prospectus included
     in such  registration  statement,  as then in  effect,  includes  an untrue
     statement of a material  fact or omits to state a material fact required to
     be  stated  therein  or  necessary  to  make  the  statements  therein  not
     misleading in the light of the circumstances then existing.

11.  ADJUSTMENTS TO COMMON STOCK EXERCISE PRICE AND NUMBER OF SECURITIES.

     The Common  Stock  Exercise  Price in effect at any time and the number and
kind of securities  purchased  upon the exercise of the Warrants will be subject
to adjustment from time to time only upon the happening of the following events:

11.1 ADJUSTMENT FOR CHANGES IN COMMON STOCK.

     (a) (i) If at any time or from time to time the Company:

          (A)  pays a  dividend  or makes a  distribution  on its  Common  Stock
     payable  in shares of its  Common  Stock or other  capital  stock or equity
     interests of the Company;

          (B)  subdivides any of its  outstanding  shares of Common Stock into a
     larger number of shares of Common Stock;

          (C)  combines  any of its  outstanding  shares of Common  Stock into a
     smaller number of shares of Common Stock; or

          (D)  increases  or  decreases  the  number of  shares of Common  Stock
     outstanding by reclassification of its Common Stock,

then

     (ii) the number of shares of Common Stock  issuable  upon  exercise of each
Warrant  immediately  after the  happening  of such event will be  adjusted to a
number determined by:

          (A)  multiplying the number of shares of Common Stock that such Holder
     would have owned or have been  entitled to receive  upon  exercise had such
     Warrants been  exercised  immediately  prior to the happening of the events
     described in paragraphs  (i)(A)-(i)(D) above (or, in the case of a dividend
     or  distribution  of Common Stock or other shares of the Company's  capital
     stock, immediately prior to the record date therefor); by

          (B) a fraction:

               (I) the  numerator of which will be the total number of shares of
          Common Stock outstanding immediately after the happening of the events
          described in paragraphs (i)(A)-(i)(D) above; and

               (II) the  denominator of which will be the total number of shares
          of Common Stock outstanding  immediately prior to the happening of the
          events described in paragraphs (i)(A)-(i)(D) above.

     (b) The Common Stock  Exercise Price for each Warrant will be adjusted to a
number  determined by dividing the Common Stock Exercise Price immediately prior
to such event by the fraction described in Section 11.1(a)(ii)(B).

     (c) An adjustment made pursuant to this Section 11.1 will become  effective
immediately  after the effective  date of such event,  retroactive to the record
date for such  event in the case of a  dividend  or  distribution  in  shares of
Common Stock or other shares of the Company's capital stock.

11.2 ADJUSTMENT FOR CASH DIVIDENDS AND OTHER DISTRIBUTIONS.

     (a) (i) if at any time or from time to time, the Company distributes to all
holders of Common Stock:

          (A) any  dividend  or other  distribution  of cash,  evidences  of its
     indebtedness, or any other assets, properties or debt securities; or

          (B) any options, warrants or other rights to subscribe for or purchase
     any  additional  shares of Common Stock (other than, in each case,  (x) any
     rights,  options,  warrants or securities described in Section 11.3 and (y)
     any cash  dividends  or other cash  distributions  from current or retained
     earnings),

then

     (ii) the number of shares of Common  Stock  issuable  upon the  exercise of
each Warrant will be increased to a number determined by:

          (A) multiplying the number of shares of Common Stock issuable upon the
     exercise of such Warrant  immediately prior to the record date for any such
     dividend or distribution; by

          (B) a fraction:

               (I) the  numerator of which will be the current  Market Price per
          share  of  Common  Stock on the  record  date  for  such  dividend  or
          distribution; and

               (II) the  denominator  of which will be such current Market Price
          per share of Common  Stock on the  record  date for such  dividend  or
          distribution less the sum of

                    (X) the  amount of cash,  if any,  distributed  per share of
               Common Stock; and

                    (Y) the  fair  value  (as  determined  in good  faith by the
               Board,  whose   determination  shall  be  evidenced  by  a  board
               resolution, a copy of which will be sent to Holders upon request)
               of the portion,  if any, of the  distribution  applicable  to one
               share of Common Stock,  consisting of evidences of  indebtedness,
               shares of stock, securities,  other assets or property, warrants,
               options or subscription or purchase rights;

     (b) The Common Stock Exercise Price will be adjusted to a number determined
by dividing the Common Stock  Exercise  Price  immediately  prior to such record
date by the such fraction described in Section 11.2(a)(ii)(B).  Such adjustments
will be made whenever any  distribution is made and will become  effective as of
the  date  of  distribution,  retroactive  to  the  record  date  for  any  such
distribution;  provided  that the Company is not required to make an  adjustment
pursuant to this  Section 11.2 if at the time of such  distribution  the Company
makes the same  distribution  to Holders of  Warrants  as it makes to holders of
Common  Stock pro rata based on the  number of shares of Common  Stock for which
such Warrants are exercisable (whether or not currently exercisable).

     (c) In the event that  Holders of a Majority  of the  Warrants  and Warrant
Shares  disagree  with the  Company's  determination  of the  fair  value of any
evidences of indebtedness shares of stock, securities,  other assets or property
pursuant to this Section  11.2,  then such fair value shall be  determined by an
Independent  Financial  Expert  selected  by the  Holders of a  Majority  of the
Warrants and Warrant  Shares,  and  reasonably  acceptable  to the Company.  The
Holders  and the  Company  will  share  equally  the  costs  of the  Independent
Financial Expert.

     (d) No adjustment  will be made pursuant to this Section 11.2 which has the
effect of decreasing the number of shares of Common Stock issuable upon exercise
of each Warrant or increasing the Common Stock Exercise Price

11.3 ADJUSTMENT FOR RIGHTS ISSUED TO ALL HOLDERS OF COMMON STOCK.

     (a) (i) If at any  time or from  time to time  the  Company  issues  to all
holders of Common Stock:

          (A) any charge,  rights,  options or warrants entitling the holders of
     such rights,  options or warrants to  subscribe  for  additional  shares of
     Common Stock at a price per share that is equal to or greater at the record
     date for such  issuance  than the then  current  Market  Price per share of
     Common  Stock,  but less than the Common Stock  Exercise  Price  Premium as
     determined on such date; or

          (B) securities  convertible  into or  exchangeable  or exercisable for
     additional shares of Common Stock,  entitling such holders to subscribe for
     or purchase  shares of Common Stock at a price per share at the record date
     for such  issuance  that is (x) equal to or greater  than the then  current
     Market Price per share of Common Stock on such date,  and (y) less than the
     Common Stock Exercise Price Premium as determined on such date,

then

     (ii) the number of shares of Common  Stock  issuable  upon the  exercise of
each Warrant shall be increased to a number determined by:

          (A)  multiplying  the  number of shares  of Common  Stock  theretofore
     issuable upon exercise of each Warrant by

          (B) a fraction:

               (I) the numerator of which will be the number of shares of Common
          Stock  outstanding  immediately  prior to the issuance of such rights,
          options,  warrants or securities plus the number of additional  shares
          of Common Stock  subscribed for or purchased or into or for which such
          subscribed for or purchased  securities are convertible,  exchangeable
          or exercisable; and

               (II) the  denominator  of which  will be the  number of shares of
          Common  Stock  outstanding  immediately  prior to the issuance of such
          rights, options, warrants or securities; and

     (iii) no adjustment will be made to the Common Stock Exercise Price.

     (b) (i) If at any  time or from  time to time  the  Company  issues  to all
holders of Common Stock:

          (A) any charge,  rights,  options or warrants entitling the holders of
     such rights,  options or warrants to  subscribe  for  additional  shares of
     Common Stock at a price per share that is lower at the record date for such
     issuance  than the then current  Market Price per share of Common Stock and
     less than the Common Stock  Exercise  Price  Premium as  determined on such
     date; or

          (B) securities  convertible  into or  exchangeable  or exercisable for
     additional shares of Common Stock,  entitling such holders to subscribe for
     or purchase  shares of Common Stock at a price per share at the record date
     for such issuance  that is (x) less than the then current  Market Price per
     share of  Common  Stock on such  date and (y) less  than the  Common  Stock
     Exercise Price Premium as determined on such date,

then

     (ii) the number of shares of Common  Stock  issuable  upon the  exercise of
each Warrant shall be increased to a number determined by multiplying the number
of shares of Common Stock theretofore  issuable upon exercise of each Warrant by
the fraction described in Section 11.3(a)(ii)(B); and

     (iii)  the  Common  Stock  Exercise  Price  shall be  adjusted  to a number
determined by dividing the Common Stock Exercise Price immediately prior to such
date of issuance by a fraction:

          (A) the  numerator  of which  will be the  number  of shares of Common
     Stock  outstanding  immediately  prior  to the  issuance  of  such  rights,
     options,  warrants or securities  plus the number of  additional  shares of
     Common  Stock  subscribed  for or  purchased  or  into  or for  which  such
     subscribed for or purchased  securities are  convertible,  exchangeable  or
     exercisable; and

          (B) the  denominator  of which  will be the number of shares of Common
     Stock  outstanding  immediately  prior  to the  issuance  of  such  rights,
     options,  warrants or securities  plus the total number of shares of Common
     Stock which the aggregate  consideration  received by the Company (assuming
     the  exercise  or  conversion  of all such  rights,  options,  warrants  or
     securities)  would  purchase at the then current  Market Price per share of
     Common Stock.

     Such  adjustment  will be made  immediately  after such rights,  options or
warrants are issued and will become  effective,  retroactive  to the record date
for the determination of stockholders entitled to receive such rights,  options,
warrants or securities.

     (c) (i) If at any  time or from  time to time  the  Company  issues  to all
holders of Common Stock:

          (A) any charge,  rights,  options or warrants entitling the holders of
     such rights,  options or warrants to  subscribe  for  additional  shares of
     Common Stock at a price per share that is equal to or greater at the record
     date for such issuance than the Common Stock Exercise Price Premium on such
     date; or

          (B) securities  convertible  into or  exchangeable  or exercisable for
     additional shares of Common Stock,  entitling such holders to subscribe for
     or purchase shares of Common Stock at a price per share that is equal to or
     greater at the record date for such issuance than the Common Stock Exercise
     Price Premium on such date,

then

     (ii) no  adjustment  will be made to the  number of shares of Common  Stock
issuable the number of shares of Common Stock issuable upon the exercise of each
Warrant; and

     (iii) no adjustment will be made to the Common Stock Exercise Price.

     (d) No adjustment  will be made pursuant to this Section 11.3 which has the
effect of  decreasing  the  number of shares of Common  Stock  purchasable  upon
exercise of each Warrant or of increasing the Common Stock Exercise Price.

11.4 ADJUSTMENT FOR OTHER ISSUANCES OF COMMON STOCK OR RIGHTS.

     (a) (i) Except for  transactions  by the  Company  contemplated  by section
17.17(a)(ii),  (iii),  (iv) and (vi) of the Loan  Agreement,  the Employee Stock
Options  and the  Excluded  Warrants  , if at any time or from  time to time the
Company issues:

          (A) shares of Common Stock (subject to the provisions below);

          (B)  rights,  options or  warrants  entitling  the  holder  thereof to
     subscribe for shares of Common Stock (provided, however, that no adjustment
     shall be made upon the exercise of such rights, options or warrants); or

          (C) securities  convertible  into or  exchangeable  or exercisable for
     Common Stock (provided,  however, that no adjustment shall be made upon the
     conversion,  exchange or exercise of such securities  (other than issuances
     specified in (A), (B) or (C) which are made as the result of  anti-dilution
     adjustments in such securities)), in each case, at a price per share at the
     record date for such issuance that is (x) equal to or greater than the then
     current  Market Price per share of Common Stock on such date,  and (y) less
     than the Common Stock Exercise Price Premium as determined on such date,

then

     (ii) the number of shares of Common  Stock  issuable  upon the  exercise of
each Warrant will be increased to a number determined by:

          (A)  multiplying  the  number of shares  of Common  Stock  theretofore
     issuable upon exercise of each Warrant; by

          (B) a fraction:

               (I) the numerator of which will be the number of shares of Common
          Stock outstanding  immediately prior to such sale or issuance plus the
          number  of  additional  shares  of  Common  Stock  subscribed  for  or
          purchased  or into or for  which  such  securities  subscribed  for or
          purchased   that  are  issued   are   convertible,   exchangeable   or
          exercisable; and

               (II) the  denominator  of which  will be the  number of shares of
          Common Stock  outstanding  immediately prior to such sale or issuance;
          and

     (iii) no adjustment will be made to the Common Stock Exercise Price.

     (b) (i) Except for  transactions  by the  Company  contemplated  by section
17.17(a)(ii),  (iii),  (iv) and (vi) of the Loan  Agreement,  the Employee Stock
Options  and the  Excluded  Warrants,  if at any  time or from  time to time the
Company issues securities of the type described in Section 11.4(a)(i)(A), (B) or
(C) at a price per share at the record date for such  issuance  that is (x) less
than the then current  Market Price per share of Common Stock on such date,  and
(y) less than the Common  Exercise  Stock Price  Premium as  determined  on such
date,

then

     (ii) the number of shares of Common  Stock  issuable  upon the  exercise of
each Warrant will be increased to a number  determined by multiplying the number
of shares of Common Stock theretofore  issuable upon exercise of each Warrant by
the fraction described in Section 11.4(a)(ii)(B); and

     (iii)  the  Common  Stock  Exercise  Price  will be  adjusted  to a  number
determined by dividing the Common Stock Exercise Price immediately prior to such
date of issuance by a fraction:

          (A) the  numerator  of which  will be the  number  of shares of Common
     Stock  outstanding  immediately  prior to such  sale or  issuance  plus the
     number of additional  shares of Common Stock subscribed for or purchased or
     into or for which such  securities  subscribed  for or  purchased  that are
     issued are convertible, exchangeable or exercisable; and

          (B) the  denominator  of which  will be the number of shares of Common
     Stock outstanding immediately prior to such sale or issuance plus the total
     number of shares of Common Stock which the aggregate consideration received
     by the Company  (assuming  the exercise or  conversion  of all such rights,
     options, warrants or securities, if any) would purchase at the then current
     Market Price per share of Common Stock.

     Such adjustments shall be made whenever such rights, options or warrants or
convertible securities are issued.

     (c) (i) Except for  transactions  by the  Company  contemplated  by section
17.17(a)(ii),  (iii),  (iv) and (vi) of the Loan  Agreement,  the Employee Stock
Options  and the  Excluded  Warrants,  if at any  time or from  time to time the
Company issues securities of the type described in Section 11.4(a)(i)(A), (B) or
(C) at a price per share at the record date for such  issuance  that is equal to
or greater than the Common Stock  Exercise  Price  Premium as determined on such
date,

then

     (ii) no  adjustment  will be made to the  number of shares of Common  Stock
issuable upon the exercise of each Warrant; and

     (iii) no adjustment will be made to the Common Stock Exercise Price.

     (d) No adjustment  will be made pursuant to this Section 11.4 which has the
effect of decreasing the number of shares of Common Stock issuable upon exercise
of each warrant or of increasing the Common Stock Exercise Price.

     (e) For purposes of this Section 11.4 only,  any issuance of Common  Stock,
or rights, options or warrants to subscribe for, or other securities convertible
into or  exercisable  or  exchangeable  for,  Common Stock,  which  issuance (or
agreement to issue) is:

          (i) in exchange for or otherwise in connection with the acquisition of
     the property  (excluding  any such  exchange  exclusively  for cash) of any
     Person; and

          (ii) at a price per share  equal to the  current  Market  Price at the
     time of signing a definitive agreement shall be deemed to have been made at
     a price per share equal to the current Market Price per share at the record
     date with respect to such issuance (the time of closing or  consummation of
     such exchange or acquisition) if such definitive  agreement is entered into
     within 90 days of the date of such agreement in principle.

11.5 NO ADJUSTMENT.

     No  adjustment  in the number of shares of Common Stock  issuable  upon the
exercise of each  Warrant  shall be required  under this  Agreement  unless such
adjustment  would result in an increase or decrease of at least one percent (1%)
of the Common Stock Exercise  Price;  provided,  that any  adjustments  which by
reason of this Section 11.5 are not required to be made shall be carried forward
and taken into account in any subsequent  adjustment.  All calculations shall be
made to the nearest one-hundredth of a cent or to the nearest  one-thousandth of
a share, as the case may be.

11.6 NOTICE OF ADJUSTMENT

     Whenever the Common Stock  Exercise Price or the number of shares of Common
Stock and other  property,  if any,  issuable  upon  exercise of the Warrants is
adjusted, as provided in this Agreement, the Company shall deliver to the Holder
a certificate  setting  forth,  in reasonable  detail,  the event  requiring the
adjustment and the method by which such adjustment was  calculated,  including a
description of the basis on which:

          (a) it  determined  the fair value of any  evidences of  indebtedness,
     other securities or property or warrants,  options or other subscription or
     purchase rights; and

          (b) the current  Market Price of the Common Stock was  determined,  if
     either of such  determinations  were  required),  and specifying the Common
     Stock Exercise Price and the number of shares of Common Stock issuable upon
     exercise of Warrants after giving effect to such adjustment.

11.7 MERGER OR CONSOLIDATION.

     In case of any capital reorganization,  other than in the cases referred to
in Section 11.1 or 11.2, or any  consolidation of the Company with, or merger of
the Company into,  another  corporation  (other than a  consolidation  or merger
which  does not  result in any  reclassification  or  change of the  outstanding
Common  Stock),  or the sale of the  property  of the  Company as an entirety or
substantially  as an entirety  (collectively,  such actions being referred to as
"Reorganizations"),  the successor entity (if other than the Company)  resulting
from such  Reorganization or the person purchasing such assets shall execute and
deliver to the Holder a supplemental warrant agreement providing that the Holder
of each  Warrant  then  outstanding  or to be  outstanding  shall have the right
thereafter  (until the expiration of such Warrant) to receive,  upon exercise of
such Warrant,  the kind and amount of shares of stock and other  securities  and
property receivable upon such Reorganization by a Holder of the number of shares
of Common Stock for which such  Warrant  might have been  exercised  immediately
prior to such Reorganization.  Such supplemental warrant agreement shall provide
for  adjustments  which shall be identical to the  adjustments  provided in this
Section 11. This subsection shall similarly apply to successive Reorganizations.

11.8 OTHER DILUTIVE EVENTS.

     If any event occurs as to which the  provisions  of this Section 11 are not
strictly applicable or, if strictly applicable,  would not fairly and adequately
protect the  conversion  rights of the Holders in accordance  with the essential
intent and principles of such provisions, then the Board of Directors shall make
such adjustments in the application of such provisions,  in accordance with such
essential  intent and  principles,  as shall be reasonably  necessary to protect
such  purchase  rights  as  aforesaid;  provided  that no such  adjustment  will
increase  the Common  Stock  Exercise  Price or decrease the number of shares of
Common Stock obtainable as otherwise determined pursuant to this Section 11.

12.  EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES.

     Each  Warrant  Certificate  is  exchangeable,  without  expense,  upon  its
surrender by the Holder at the principal  executive  office of the Company for a
new Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase  the same number of Warrant  Shares in such  denominations  as
shall be designated by the Holder at the time of such surrender.

     Upon receipt by the Company of evidence  reasonably  satisfactory  to it of
the loss, theft,  destruction or mutilation of any Warrant Certificate,  and, in
case of  loss,  theft  or  destruction,  of  indemnity  or  security  reasonably
satisfactory to it and  reimbursement to the Company of all reasonable  expenses
incidental  thereto,  and upon  surrender and  cancellation  of the Warrant,  if
mutilated,  the Company will make and deliver a new Warrant  Certificate of like
tenor, in lieu of such Warrant Certificate.

13.  LIMITATION OF FRACTIONAL INTERESTS.

     The Company shall not be required to issue  fractional  Warrant Shares upon
exercise of the  Warrants  or  distribute  Warrant  Certificates  that  evidence
fractional Warrant Shares. In addition, in no event shall the Holder be required
to make any  payment  of a fraction  of a cent.  In lieu of  fractional  Warrant
Shares,  there shall be paid to the holders of Warrant  Certificates at the time
the Warrants are  exercised an amount in cash equal to the same  fraction of the
current  Market Price per Warrant  Share on the business day  preceding the date
the Warrant Certificates  evidencing such Warrants are surrendered for exercise.
Such  payments  shall  be  made  by  check  or by wire  transfer  to an  account
designated by such Holder.  If any Holder  surrenders for exercise more than one
Warrant  Certificate,  the number of Warrant  Shares  deliverable to such Holder
may, at the option of the  Company,  be  computed on the basis of the  aggregate
amount of all the Warrants exercised by such Holder.

14.  RESERVATION AND LISTING OF SECURITIES.

     The Company will at all times reserve and keep  available  shares of Common
Stock, free from preemptive rights, out of its authorized but unissued shares of
Common Stock,  for the purpose of enabling it to satisfy any obligation to issue
Warrant  Shares upon  exercise of  Warrants.  Every  transfer  agent  ("Transfer
Agent") for the Common Stock and other  securities of the Company  issuable upon
the exercise of the Warrants will be irrevocably  authorized and directed at all
times to reserve  such number of  authorized  shares of Common Stock as shall be
necessary  for such purpose.  The Company will supply every such Transfer  Agent
with duly  executed  stock  and other  certificates,  as  appropriate,  for such
purpose.  Upon exercise of the Warrants and payment of the Common Stock Exercise
Price,  all shares of Common Stock upon such exercise  shall be duly and validly
issued,  fully paid,  non-assessable and not subject to the preemptive rights of
any  stockholder.  Upon exercise of the Warrants,  the Company will use its best
efforts  to cause all  shares of Common  Stock  issued in  connection  with such
exercise to be listed (subject to official notice of issuance) on all securities
exchanges on which the Common Stock issued to the public in connection  herewith
may then be listed and quoted on NASDAQ or the OT Electronic Bulletin Board.

15.  NOTICES TO WARRANT HOLDERS.

     Nothing  contained in this Agreement  shall be construed as conferring upon
the  Holders  the  right  to  vote  or to  consent  or to  receive  notice  as a
stockholder  in respect of any  meetings  of  stockholders  for the  election of
directors  or  any  other  matter,  or as  having  any  rights  whatsoever  as a
stockholder  of the Company.  If,  however,  at any time prior to the Expiration
Date:

          (a) the Company  takes a record of the holders of its shares of Common
     Stock  for  the  purpose  of  entitling  them  to  receive  a  dividend  or
     distribution payable otherwise than out of current or retained earnings, as
     indicated by the accounting  treatment of such dividend or  distribution on
     the books of the Company, or

          (b) a  dissolution,  liquidation  or  winding  up of  the  Company,  a
     consolidation  or  merger,  or  sale  of  all or  substantially  all of its
     property, assets and business as an entirety shall be proposed, the Company
     will give written  notice of such event at least fifteen (15) days prior to
     the date fixed as a record date or the date of closing the  transfer  books
     for the  determination  of the  stockholders  entitled  to  such  dividend,
     distribution,   convertible  or  exchangeable  securities  or  subscription
     rights,  or entitled  to vote on such  proposed  dissolution,  liquidation,
     winding up or sale.  Such notice shall specify such record date or the date
     of closing the  transfer  books,  as the case may be.  Failure to give such
     notice or any defect  therein  shall not affect the  validity of any action
     taken in connection  with the  declaration or payment of any such dividend,
     or any proposed dissolution, liquidation, winding up, consolidation, merger
     or sale.

16.  NOTICES

     All notices, requests, consents and other communications hereunder shall be
in writing  and shall be deemed to have been duly made and sent when  delivered,
or mailed by registered or certified mail, return receipt requested:

          (a) if to a  Holder,  to the  address  of such  Holder as shown on the
     books of the Company or to such other  address as such Holder may designate
     by notice to the Company; or

          (b) if to the Company, to the address set forth on the signature pages
     to this  Agreement or to such other address as the Company may designate by
     notice to the Holders.

17.  SUPPLEMENTS; AMENDMENTS; ENTIRE AGREEMENT

     (a) Any  provisions  of this  Agreement  or the  Warrants may be amended or
waived if, but only if, such amendment or waiver is in writing and signed by the
Company and the Holders of a Majority of the Warrants and Warrant Shares.

     (b) This Agreement  (including the Loan Agreement to the extent portions of
it are referred to in this Agreement)  constitutes the entire obligations of the
parties to this Agreement and supersedes,  any previous expressions of intent or
understanding in respect of this transaction.

18.  SUCCESSORS.

     All of the covenants and provisions of this Agreement shall be binding upon
and inure to the  benefit  of the  Company,  the  Holders  and their  respective
successors and assigns hereunder.

19.  GOVERNING LAW.

     THIS AGREEMENT AND EACH WARRANT  CERTIFICATE ISSUED UNDER THIS AGREEMENT IS
GOVERNED BY NEW YORK LAW.

20.  SEVERABILITY.

     If any  provision  of  this  Agreement  shall  be  held  to be  invalid  or
unenforceable,  such invalidity or  unenforceability  shall not affect any other
provision of this Agreement.

21.  CAPTIONS.

     The caption  headings of the Sections of this Agreement are for convenience
of reference only and are not intended,  nor should they be construed as, a part
of this Agreement and shall be given no substantive effect.

22.  BENEFITS OF THIS AGREEMENT.

     Nothing  in this  Agreement  shall be  construed  to give to any  person or
corporation other than the Company and the Holders any legal or equitable right,
remedy or claim under this  Agreement.  This Agreement shall be for the sole and
exclusive benefit of the Company and any Holders.

23.  COUNTERPARTS.

     This  Agreement  may be  executed  in any  number  of  counterparts  and by
different  parties on  separate  counterparts  which when taken  together  shall
constitute one agreement.

                     Remainder of page intentionally blank.
<PAGE>

     IN WITNESS  WHEREOF the  parties  have  caused  this  Agreement  to be duly
executed, as of the day and year first above written.

                                           CHAPARRAL RESOURCES, INC.

                                           By: /s/John G. McMillian
                                              ----------------------------------
                                              Name:  John G. McMillian
                                              Title: Director

                                           Address for Notices:

                                           Chaparral Resources, Inc.
                                           16945 Northchase Drive,
                                           Suite 1440
                                           Houston, TX 77060
                                           Attn: President
                                           Telephone: 281-877-7100
                                           Fax: 281-877-0989


                                           SHELL CAPITAL LIMITED

                                           By:/s/ Michael Treanor
                                              ----------------------------------
                                              Name:  Michael Treanor
                                              Title: Director

                                           Address for Notices:

                                           Shell Capital Limited
                                           Shell Centre
                                           London SE1 7NA
                                           England
                                           Attn: The Financial Controller
                                           Tel:
                                           Fax: 44-207-934-7058
<PAGE>

                                    EXHIBIT A

                           FORM OF WARRANT CERTIFICATE

     THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE  AND THE OTHER  SECURITIES
ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE OFFERED OR SOLD, EXCEPT PURSUANT TO (i) AN EFFECTIVE  REGISTRATION  STATEMENT
UNDER THE  SECURITIES  ACT OF 1933 (THE "ACT"),  (ii) TO THE EXTENT  APPLICABLE,
RULE 144 UNDER THE ACT (OR ANY SIMILAR OR SUCCESSOR RULE UNDER SUCH ACT RELATING
TO THE  DISPOSITION  OF  SECURITIES),  OR (iii) AN OPINION OF  COUNSEL,  IF SUCH
OPINION  SHALL BE  REASONABLY  SATISFACTORY  TO COUNSEL FOR THE ISSUER,  THAT AN
EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.

     THE TRANSFER OR EXCHANGE OF THE SECURITIES  REPRESENTED BY THIS CERTIFICATE
IS RESTRICTED IN ACCORDANCE WITH THE AMENDED AND RESTATED WARRANT AGREEMENT (THE
"WARRANT AGREEMENT") BETWEEN CHAPARRAL RESOURCES, INC. AND SHELL CAPITAL LIMITED
DATED AS OF APRIL 18, 2001, AS THE SAME MAY BE AMENDED, MODIFIED OR SUPPLEMENTED
FROM TIME TO TIME.

                                  Warrant No. 2

                                  Issuable for
                        1,785,455 Shares of Common Stock

                               WARRANT CERTIFICATE

     This  Warrant   Certificate   certifies  that  Shell  Capital  Limited,  or
registered  Assigns,  is the Holder of Warrants and shall have the right,  which
may be exercised at any time between the  Commencement  Date and the  Expiration
Date, to purchase up to 1,785,455  shares of Common Stock,  par value $.0001 per
share, of the Company (the "Common Stock"). The price at which the Warrant shall
be exercisable shall be $9.79 per share (the "Common Stock Exercise Price").

     A Warrant may be exercised upon surrender of this Warrant  Certificate  and
payment  of the  Common  Stock  Exercise  Price at an  office  or  agency of the
Company,  but  subject to the  conditions  set forth  herein and in the  Warrant
Agreement.  Payment of the Common  Stock  Exercise  Price  shall be made by wire
transfer to an account  designated  by the Company or by  certified  or official
bank check payable to the order of the Company in United States Dollars.

     No  Warrant  may  be  exercised  after  5:00  p.m.,  Houston  time,  on the
Expiration  Date,  at which time all  Warrants  evidenced  by this  Certificate,
unless exercised prior to that time, shall be void.


     The  Warrant  evidenced  by  this  Warrant  Certificate  is  part of a duly
authorized  issue of Warrants  issued pursuant to the Warrant  Agreement,  which
Warrant  Agreement  is  incorporated  by  reference  in and  made a part of this
Warrant  Certificate  and is  referred  to  for a  description  of  the  rights,
limitation of rights, obligations,  duties and immunities of the Company and the
holders of the Warrant.

     The Warrant  Agreement  provides that upon the occurrence of certain events
the  Common  Stock  Exercise  Price  and the type and  number  of the  Company's
securities  issuable upon the occurrence of such events may,  subject to certain
conditions,  be adjusted. In such event, the Company will, at the request of the
Holder, issue a new Warrant Certificate  evidencing the adjustment in the Common
Stock  Exercise  Price and the number and type of  securities  issuable upon the
exercise of the Warrant;  provided that the failure of the Company to issue such
new Warrant Certificates shall not in any way change, alter or otherwise impair,
the rights of the Holder as set forth in the Warrant Agreement.

     Upon  due  presentment  for   registration  of  transfer  of  this  Warrant
Certificate at an office or agency of the Company, a new Warrant  Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of the Warrant  evidenced  by this  Warrant  Certificate  shall be issued to the
transferees in exchange for this Warrant Certificate, subject to the limitations
provided in this Warrant  Certificate and in the Warrant Agreement,  without any
charge  except for any tax or other  governmental  charge  imposed in connection
with such transfer.

     Upon the exercise of less than all of the Warrant evidenced by this Warrant
Certificate,  the  Company  shall  forthwith  issue to the Holder a new  Warrant
Certificate representing such unexercised Warrant.

     The Company may deem and treat the Holder(s) of this Warrant Certificate as
the absolute owner(s) of this Warrant  Certificate(notwithstanding  any notation
of ownership or other writing made by anyone on this Warrant  Certificate),  for
the  purpose of any  exercise of the  Warrant,  and of any  distribution  to the
Holder(s)  of this  Warrant  Certificate,  and for all other  purposes,  and the
Company shall not be affected by any notice to the contrary.

     All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.

     This Warrant  Certificate  does not entitle any Holder to any of the rights
of a shareholder of the Company.
<PAGE>

     IN WITNESS WHEREOF,  the Company has caused this Warrant  Certificate to be
duly executed under its corporate seal.

Dated as of April 18, 2001.

                                                     CHAPARRAL RESOURCES, INC.

                                                    By: /s/John G. McMillian
                                                       -------------------------
                                                        Name: John G. McMillian
                                                        Title: Director
<PAGE>

                                  PURCHASE FORM

     The undersigned  irrevocably  elects to exercise the right,  represented by
this Warrant Certificate, to purchase ________ shares of Common Stock, and makes
payment for such  securities  by wire  transfer to an account  designated by the
Chaparral Resources, Inc. in the amount of $________________,  all in accordance
with the terms of  Section  5 of the  Amended  and  Restated  Warrant  Agreement
between the Company and Shell Capital  Limited  dated as of April 18, 2001.  The
undersigned requests that a certificate for such securities be registered in the
name of _______________ whose address is  _______________________  and that such
certificate   to  be  delivered  to   ____________________   whose   address  is
______________________________,  and if said  number of shares  shall not be all
the  shares  purchasable  under this  Warrant  Certificate,  that a new  Warrant
Certificate for the balance of the shares  purchasable  under the within Warrant
Certificate be registered in the name of the  undersigned  warrant Holder or his
assignee as below indicated and delivered to the address stated below.

Dated:
      -----------------------------------------------

Signature:
          -------------------------------------------
<PAGE>

                                 ASSIGNMENT FORM

                      (TO BE EXECUTED BY THE HOLDER IF SUCH
              HOLDER DESIRES TO TRANSFER THIS WARRANT CERTIFICATE.)

FOR VALUE RECEIVED .................... hereby sells, assigns and transfers unto

Name
    ----------------------------------------

Address
       -------------------------------------

     this Warrant  Certificate,  together with all right,  title and interest in
the   Warrant   and   does   hereby    irrevocably    constitute   and   appoint
 ..................., attorney, to transfer the within Warrant Certificate on the
book of the within-named Company, with full power of substitution.

Dated:
      -----------------------------------------------

Signature:
          -------------------------------------------